Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else. Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%. Here are the net cash flows (in thousand $) To determine: The normal and abnormal cash flows.

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Answer 1

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

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Scenario three: If a portfolio has a positive investment in every asset, can the expected return on a portfolio be greater than that of every asset in the portfolio? Can it be less than that of every asset in the portfolio? If you answer yes to one of both of these questions, explain and give an example for your answer(s). Please Provide a Reference

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Scenario 2: The homepage for Coca-Cola Company can be found at coca-cola.com Links to an external site.. Locate the most recent annual report, which contains a balance sheet for the company. What is the book value of equity for Coca-Cola? The market value of a company is (# of shares of stock outstanding multiplied by the price per share). This information can be found at www.finance.yahoo.com Links to an external site., using the ticker symbol for Coca-Cola (KO). What is the market value of equity? Which number is more relevant to shareholders – the book value of equity or the market value of equity?

Answer 2

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 6

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

Answer 7

Chapter 12, Problem 10MC

1)

Summary Introduction

Case summary:

Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.

Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs rate of return of 10%.

Here are the net cash flows (in thousand $)

To determine: The normal and abnormal cash flows.

Answer 8

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

Answer 9

2)

Summary Introduction

To determine: The NPV, IRR and MIRR of project P.

Answer 10

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 11

3)

Summary Introduction

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3P Ch. 12 - Prob. 4P Ch. 12 - Prob. 5P Ch. 12 - Prob. 6P

Solution Summary: The author explains how Person X decided to buy a fast food franchise after his grandfather died. He evaluated the two alternatives and found that both have characteristics of risk and need rate of return of 10%.

To determine: The NPV, IRR and MIRR of project P.

To determine: The project P’s NPV profile and whether project P have normal or abnormal cash flows and whether it must be accepted.

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Chapter 12 Solutions